U.S. Dollar Down ahead of Fed Policy Decision

The dollar softened in Asia Wednesday on expectations that the U.S. Federal Reserve will delay an interest rate hike following fresh data pointing to slowing growth in the world's biggest economy, analysts said. 

The greenback fell to 118.83 yen in afternoon trade from 118.88 yen in New York, while it is sharply down from the 119.10 yen earlier Tuesday in Asia.

And while the euro edged down to $1.0964 and $130.29 from $1.0981 and 130.55 yen in U.S. trade, it is well up from $1.0880 and 129.54 yen earlier Tuesday.

The Fed's policy-setting committee ends a two-day meeting later Wednesday and traders are betting on a rate hike being put back, while also looking for some guidance about the bank's intentions later in the year. 

The central bank had previously signalled a possible hike in June, but analysts now expect it in September at the earliest following a spate of soft readings.

The latest came Tuesday as the Conference Board reported its index of consumer confidence tumbled in March, instead of rising as expected. Consumers reported growing pessimism about current and short-term U.S. economic conditions.

"Expectations for tonight’s ... decision have now changed significantly, with traders now expecting interest rate lift-off to be pushed out from June to September at least, sending the U.S. dollar into reverse," said Nicholas Teo, market analyst at CMC Markets in Singapore. 

"The oil crash, slower overseas economies and a higher (dollar) have made it increasingly difficult for the U.S. to defy gravity," he added. 

Also in focus is the government's first estimate of U.S. first-quarter economic growth, with analysts predicting a 1.0 percent rate, down from 2.2 percent in the previous three months.

The dollar was mostly lower against other Asia-Pacific currencies. 

It weakened to 63.20 Indian rupees from 63.38 rupees on Tuesday, to 1,068.54 South Korean won from 1,070.86 won, to Tw$30.50 from Tw$30.53 and to Sg$1.3216 from Sg$1.3281. 

The greenback also eased to 12,966.00 Indonesian rupiah from 12,991.40 rupiah and to 44.25 Philippine pesos from 44.26 pesos, while gaining marginally to 32.68 Thai baht from 32.61 baht. 

The Australian dollar rose to 79.94 U.S. cents from 78.68 cents and the Chinese yuan stood at 19.15 Japanese yen from 19.19 yen.